Sunday, July 27, 2008

Here's How to Avoid Defaulting on Your Student Loan

By Sandy Regal

People that default on their student loan usually find their credit drop. There are serious implications when you default on your student loan as it can affect your wages and possible tax refunds in addition to a poor credit rating.

Defaulting on your student loan is avoidable if you just do a few simple things. Before you do anything you will regret, make sure that you keep in contact with your lender.

Just by informing your lenders immediately you know there's a problem with you debt will almost certainly halt the need to default. I remember when I was finding it increasingly difficult to maintain my monthly debt repayments accumulated at college.

My education was not a tangible product but service so how would they try and take that back? If you take this approach you will definitely have a problem and default on your student loan.

Contacting my lender was the first and most important step in avoiding going default on the debt. After all the worry, getting a deferment was quite simple and painless. The Lending Company showed me the steps that would have to be taken in order to suspend payment until a time when I could start repaying them.

It only took a week to have the payments suspended until I could re-commence at a later date. Not all my financial commitments would be handled so easily but this one helped greatly in my debt reduction plan. My student loan providers understanding assistance helped me when other agencies weren't so obliging.

Paying more for your loan in the long term is a consequence of deferment because interest is still adding up whilst it is left unpaid. Despite the additional cost it is preferable to a defaulted student loan. If you check with your lender you may find it is possible to pay in the occasional contribution during the deferred period.

Paying just the interest on your loan is an option that some banks will agree to. It is not uncommon for banks to allow you to make interest payments only if you have financial problems. So the amount you owe will remain the same during this 'holiday' period but you will avoid a defaulted student loan.

Without student loans, many people would not be able to afford a college education. If too many people have defaulted student loans, the money is not available for new students. Some people find that they can make partial payments to their lender.

Avoiding your defaulted student loan is easier if you make alternative payment arrangements with your finance provider. Finance for higher education may then still be available for students who require it.

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